We are in the process of purchasing a second home to be used for winter vacation purposes. We may also rent the home for part of the year.
In order to do this we plan to take > $150,000 from our 401k accounts to pay cash for the home. If I understand tax laws properly, this $150,000 will be subject to both federal and state income taxes in the neighborhood of > $30,000.
Is there a way to avoid paying this income tax? In effect we are changing our investment portfolio by moving $150,000 from our 401k into an asset I call 2nd home.